flash the bios manually. All you need is a floppy drive installed and a spare floppy you can format. Then download the executable file from asus's website and it will format the floppy for you, then boot from the device using boot sequence in bios. You can do the same with usb keys now bu i'm not sure if p965 would have supported that.
On the asus site it has the list of bios updates, look for the update which actually adds the e8500 the the cpu support list. Try installing this bios and not the newest one maybe there is something wrong with the newest bios. Or google to see what bios verison others are using. But to me it sounds as if the e8500 is faulty.
Ok
What do I do if I don't have a 3.5" Floppy drive installed? All I have is a DVD-RW drive. I'm not an expert, but just from my research, I don't think the E8500 is faulty. If you put in Google search E8500, P5B Deluxe, it looks like alot of other people are having the same issue with this combo. Heres an example, identical situation:
e8500+p5b-deluxe = hang on post
I've posted on the Asus forums. Hopefully someone can chime in:
ASUSTeK Computer Inc.-Forum- Installed E8500 Processor, won't POST at startup now!
I think right now, the priority for me is to find out what the correct version of BIOS I need, and I need to know/learn how to properly Flash my BIOS. If I do this, and it still doesn't work, Ill just assume the E8500 chip is faulty.